People are angry.
The Federal Emergency Management Agency (FEMA) has put its flood insurance reforming Risk Rating 2.0 into effect. The idea behind the reforms is to make flood insurance rates through the National Flood Insurance Program (NFIP) actuarily sound.
It will take a decade to complete and increases are phased in over time until every homeowner is paying a premium that reflects that risk to their home by flood.
To get there, and by the time the reforms are complete, homeowners in some zip codes will be looking at huge premium increases. For example, Plaquemines Parish is on the Louisiana coast. Currently, the average rate homeowners pay is $842 a year. It is expected to rise 545% to $5,431.
In Collier County, Florida rates could average $4,000 a year. Currently, the average rate is $1,053 a year.
David Maurstad is the FEMA official in charge of the NFIP. He says the increases are a good thing because it has people appreciating the risk they have to their homes from flood damage.
“The nation is at risk because of increased climate change and because of increased development in risky areas,” Maurstad said, “and there’s a better understanding of that and how we can all work as one community to not ignore the flood risk this nation faces year after year.”
Risk Rating 2.0 says rate hikes can rise more than 18% a year. It’s that 18% that worries many in the areas now experiencing huge hikes. Part of the why they’re worried is that some could see 18% a year for a full decade.
And the area most affected — and that is the riskiest — is the coasts of Florida and Louisiana.
Maurstad said the average premium now for a single-family dwelling is $888. FEMA predicts that will double to $1,808 per year in the next decade. But not everyone will see an increase. Maurstad said one million of the 4.7 million policyholders with the NFIP will see a drop of $85 a month.
And that leads us to reform of the reforms. Democrat, Rep. Frank Pallone of now hurricane and superstorm prone, New Jersey, said he is going to introduce legislation soon that will “reform the entire National Flood Insurance Program.”
Calling NFIP insurance “unaffordable,” he wants to “create new affordability measures.”
Maurstad thinks Congress needs to reform Risk Rating 2.0. “I talk to members, and there’s acknowledgement that something needs to be done,” Maurstad said. “It’s a matter of deciding how we’re going to address the affordability problem, not if we’re going to address the affordability problem.”
And it is a serious problem for low-income households in high risk areas.
On April 18th the House Homeland Security Committee held a hearing on the problems with unaffordable rate increases on the poor. Homeland Security Secretary Alejandro Mayorkas — who supervises FEMA and the NFIP — said the increases are forcing some people to — in a worse case scenario — drop their flood insurance coverage, or even sell their homes.
“We are reviewing and need to continue to review the Risk Rating 2.0 given the concerns that have been expressed with it, and I can assure you that we are doing so and we will report out our results.”
Source link: Climatewire — https://bit.ly/3N0JLl5
Source link: Insurance Journal — https://bit.ly/3N0YnAW